Free On-Demand Starts Slowly

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Nine months ago, free on-demand programming burst onto the cable scene, conceived by MSOs as a means of providing subscribers with a way to sample the fruits of video-on-demand without having to pay for them.

The theory was that FOD would help subscribers get acclimated to VOD, and thus render them more willing to ante up for subscription-based or transactional content.

Operators also viewed FOD as a key element in reducing digital churn, since current digital subscribers could use the on-demand functionality to access dozens and dozens of basic cable-type choices.

As 2002 draws to close, Time Warner Cable and Comcast Corp. have both launched free on-demand content, culled from more than a dozen programmers.

But not all basic-cable programmers have heeded FOD's siren call. Some networks were immediately cautious about giving away "free" content to consumers via on-demand platforms. FOD has also raised a host of advertising, ratings and revenue issues that have barely been explored.

"There are ways to do free," said one programming source. "And there are ways to do on-demand other than to give away high-quality, long-form programming."

WHO'S ON BOARD

But pioneers are forging ahead. Scripps Networks is offering Home & Garden Television, Do It Yourself and Food Network content on-demand, through Time Warner Cable's FOD launches. The MSO also offers content from Cartoon Network and Boomerang; Cable News Network; Comedy Central; Biography Channel; The Golf Channel; and BBC America, as well as music videos.

Comcast launched service in Philadelphia, offering fare from Comedy, Golf, Biography and History; as well as Outdoor Life Network, Comcast SportsNet, Atom Television, Court TV, C-SPAN, Wisdom Television and NBC — specifically NBC Nightly News With Tom Brokaw, Meet the Press, Dateline NBC
and local news programs from Philadelphia affiliate WCAU.

Other programmers have remained on the sidelines, or have held out while waiting for an SVOD model to develop. In that sense, FOD and SVOD have become another element in the negotiations between programmers and operators.

"We've made quite a bit of headway," said A&E Television Networks senior vice president of affiliate sales David Zagin.

The amount of content varies. Dozens of hours are available at Time Warner Cable's sites, while Comcast offers even more content.

"Comcast is looking for more hours," he said. "They want to have a broader FOD offering."

A&E offers episodes of Biography; documentary shows like Modern Marvels, History Alive
and Investigative Reports;
and original movies. "We're looking at our entire library," he said.

Zagin said MSOs have done their research on how FOD can reduce digital churn.

"On the flip side, we're having conversations about doing something on a revenue sharing model," he said. "We may introduce an SVOD model down the road. We'll be prepared in both areas."

As for advertising, Zagin said, "We're trying to deliver content without advertising pods in middle of the programming."

PAY US, SOMEDAY

Cablevision Systems Corp. is using some AETN content, but it's charging a transactional price, according to Zagin. "They are doing it on a limited test basis, but they are fairly pleased with their initial results," he said.

Charging for content is still on the minds of both Discovery and ESPN executives. Discovery began offering operators two products this summer: Choice 10, a free on-demand package, as well as an SVOD package. It has yet to launch either offering.

"We recognize that on-demand is an inevitable progression toward the killer C's of choice, convenience and control," said Discovery Networks U.S. vice president of new media Clint Stinchcomb. "We have great depth of content," he said — upwards of 70,000 hours.

"Content that's offered for a monthly price, as compared to a transactional basis, is a much better way to go," he said.

"On-demand is an evolution," he continued. "The operators want to perfect pay TV on-demand. There's a lot of noodling going back and forth. The next phase will be taking a look at traditional basic services on-demand."

The problem with flooding FOD with basic programming comes from the ratings, and how they affect ad rates, Stinchcomb said. If TLC's rating dips from a 1.3 to 1.0, "there's no way to merchandise that back to advertisers if the 0.3 is the on-demand viewer." On-demand viewing may be rated in the future, "but we're not there yet," he said.

ESPN continues to pitch a paid model, both on a per-program basis, and an SVOD model, perhaps sold at $5.95 a month.

"The good news is that operators have SVOD on their radar screens," said ESPN vice president of alternative technologies and new-media sales Matt Murphy. "I think you'll see some movement in the first quarter. We've had had some positive conversations on SVOD."

ESPN programs are available on a per-program basis — typically for $1.99 — in about two dozen systems, including a few Comcast systems beyond Philadelphia. ESPN offers about 20 hours per month through In Demand LLC.

In January, ESPN will launch localized content in six unnamed markets, allowing hometown sports fans to see vintage VOD content featuring their favorite teams and players.

"We will be extracting more titles from our library for those markets," Murphy said. "It's a great step for us in our VOD model."

A third step will be seasonal programming, during the NFL playoff season and March Madness, he said.

WEATHER FORECAST

The Weather Channel has had much success with online and interactive-TV content, but VOD presents an interesting hurdle for the programmer.

"We do want to participate in VOD because weather has been extremely successful in other on demand areas," said Weather vice president of ITV and VOD Lisa Shankle. "But we need to be able to deliver the content in a timely fashion, and that's a big challenge right now. We need to deliver content that has to be refreshed in an hour or two. It's just going to be some time."

The local forecasts on Weatherstar, with its current-conditions text, change from minute to minute, she said. Weather Channel is exploring the combinations of ITV and VOD.

"VOD works when it is a combination of ITV as you know it today, with VOD," Shankle said. "The ITV piece allows you to deliver the current conditions and the video piece could be the forecast product. That works beautifully for us but it's at least a year away.

"There is other types of content, such as hurricane reports, we could potentially add down the road," she said.

Shankle also noted that weather forecasts are "a great kind content to utilize at off-peak time periods and could help operators get consumers to use VOD regularly by checking the VOD weather forecast."

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